U.S. sees $3.60 gas by June and fewer trips

WASHINGTON -- Average gasoline prices will shoot up to $3.60 a gallon in June and remain nearly that high into fall, the Energy Information Administration predicted Tuesday.

In its annual report on fuel prices during the summer vacation season, the statistical and analytical arm of the Energy Department said it expects gasoline prices to peak in June to just more than $3.60 a gallon for regular unleaded. The monthly average diesel price is expected to peak at just more than $3.90 per gallon this month.

The summer driving season is defined as April 1 to Sept. 30. The EIA predicted the average gasoline price over that period will be around $3.54 a gallon nationwide. That price might lead Americans to drive less and use less gasoline over the period, the report said.

"The current record high prices for both crude oil and product prices belie the weakness in U.S. product demand," the EIA said. "This weakness is expected to be a prominent feature of the summer driving season."

The report's authors warned that $3.60 a gallon may be a bargain, given that "it is possible that prices at some point will cross the $4 per gallon threshold" in certain parts of the country. The report said that high-price states such as California, where gasoline cost 32 cents per gallon above the national average in March, are pushing up the national average.

The government forecast was more optimistic than private forecasters, who have been saying for months that gas prices could reach an average of $4 a gallon.

On Tuesday, regular unleaded gas prices slipped slightly to a national average of $3.331 a gallon from Monday's record of $3.339, according to AAA and the Oil Price Information Service. Prices are 55 cents higher than a year ago.

The primary reason for the high gasoline prices is the record price for crude oil, which was trading at just under $109 a barrel early Tuesday on the New York Mercantile Exchange.

Oil traders are shrugging off the highest U.S. inventories of oil and gasoline in a year, focusing instead on growing global demands for oil and related products and the risks of supply disruptions.

Adding to the rising prices in the United States is the falling dollar, which is now buying less on foreign oil markets.